Like most things, being a landlord has its advantages and disadvantages. On one hand, a rental property can yield a steady cash flow and help you build a fruitful investment portfolio. On the other hand, it’s a lot of work and you can end up with bad tenants, vacancy problems, loss of income, and many other issues. If you plan and prepare a little bit, however, you can increase the likelihood that your rental property will be successful.
Figure out your finances.
There are a lot of costs involved with buying an investment property, and it’s essential to have an idea of what to expect before jumping in. Qualifying for financing alone is more stringent than for a house you intend to inhabit. For example, Lending Tree notes you can often expect to pay 20% or more as a down payment. It’s a good idea to save up for your down payment early in the process because it will make the purchasing process easier and help you estimate what kind of house you can afford.
It’s also important to consider the other costs involved. Yes, there’s the purchase price. But you will want to perform a cost-benefit analysis on any property you’re considering to determine whether you can generate positive cash flow. This analysis should include costs like insurance, taxes, repairs, maintenance, and HOA fees, among many others.
Search for the right property.
Location is (almost) everything when it comes to choosing the right property. You want a home that has nearby attractions (e.g., shopping, parks, recreational activities, etc.) and essential business establishments (e.g., pharmacies, markets, restaurants, etc.). If you’re looking to own a long-term rental, you might want to consider the school district. Moreover, Motley Fool explains single-family homes are a good type of property to start with because they are usually more affordable and easier to manage than larger ones.
Make sure the property is safe and secure.
The first priority for managing your rental property should be the safety and security of the property and its tenants. Be sure to fix anything that compromises safety, such as a broken step, flimsy entry door, missing floor tiles, and so on.
Furthermore, you can have great home security without spending loads of money by implementing both low- and high-tech features. For instance, consider trimming the bushes near the windows and adding landscape lighting. Then consider putting the bulk of your budget toward having a sophisticated alarm system installed, which tends to average about $675.
Make sure the property is functional.
Along with making your rental property safe and secure, you want to know that it will function well for your tenants. This will look different depending on whether you manage a long-term rental or a short-term rental (such as a vacation home).
At the bare minimum, your property should supply tenants with basic appliances that work, such as a dishwasher, refrigerator, oven/stove, and HVAC system. If you have a short-term rental, you might want to add a little luxury to your guest’s experience by offering extra kitchen appliances, full laundry facilities, and so on.
Keep the property clean and attractive.
This is another area that will vary depending on whether you have a long-term or short-term rental. No matter what kind of rental you have, you need to prioritize cleaning it between tenants. Most landlords find that hiring a professional cleaning service is the most prudent way to accomplish this. If you go that route, keep in mind the average cost for one house cleaning service is about $160.
Along with cleaning, you want to spend some time on the overall aesthetic of your rental property. If it’s a long-term rental, it’s generally okay to keep it simple. For instance, you might go with neutral-colored walls (e.g., off-white, gray, greige, etc.), laminate or linoleum floors, a well-maintained lawn, and the occasional fixture. Short-term rental homes need to be fully-furnished, which means you will need to put in a little extra effort in decorating the property.
It’s critical to plan and prepare when making your first real estate investment. Remember to sort out your finances and know what to look for in a property. And when you own your property, be sure to keep it in great shape, as it will help you to keep high occupancy rates and charge the rent you need to charge.
When stepping into real estate investment, especially in the Pittsburgh area, it’s important to have support from experienced real estate professionals. The Dallas-Fincham Team is here to make buying your first rental property easy with substantial research-supported real estate advice. Fill out the form here to get started.
By guest contributor Katie Conroy